PSA Sees Profits Almost Double

PSA Group (Peugeot and Citroën) has reported a 92% increase in profit last year to 1.73bn euros, this as it considers buying General Motors’ Opel and Vauxhall brands.

PSA’s possible purchase of GM’s European brands has raised fears of job losses at Vauxhall in the UK. On Wednesday, PSA said it would “develop” the Opel and Vauxhall brands if the deal goes ahead but so far no commitments to protect jobs.

General Motors announced last week it was in discussions about selling its European brands, Opel and Vauxhall, to PSA. That prompted speculation that the French company would cut capacity by closing plants.

The two firms are expected to sign a statement of intent during the next two weeks.

PSA said its profit had risen from 5% in 2015 to 6% in 2016. It is the third year in a row that operating margin, sales and net profit have improved at the group, which flirted with bankruptcy in 2014.

As a result of the company’s improved performance, chief financial officer Jean-Baptiste de Chatillon said PSA was in a position to make “profitable investments in the interest of our shareholders”.
One investment earlier this month was the purchase of India’s Hindustan Motors and its Ambassador car brand for $12 million US.

According to Carlos Tavares, Opel needs help saying “It has been making red ink for 10 years and burning 1bn euros in cash every year. “ It’s easy to see why General Motors wants to get rid of it – but why is PSA Group so interested in taking it on?

In today’s press conference, Tavares set out a few reasons. And one of them seems to be the international reputation of German-built cars compared to their French rivals. In some countries, he said, French-built cars simply don’t sell. He didn’t specify where, although he may have been referring to the Canada and USA.

Tavares went on to say that combining the two companies would also generate cost savings. And having engineered a rescue for PSA itself, when the French giant came close to going bust in 2014, as well as turning around Nissan prior to that, Mr Tavares is setting an impressive record. But this move is likely to be a particularly tricky one as political sensitivities, labour agreements and the value people place on Opel being a premier German brand, are all factors that could make this gamble that André Citroën himself would have have probably passed on.